The 10 pillars of emergence
The nation’s ambition and response to future challenges are based on a development strategy with sturdy foundations: peace, security, investments, diversification and diplomacy.
1. A nation at peace
Peace is the cornerstone of Djibouti’s project and the center of its architecture. Domestic peace and national cohesion are vital for economic growth and emergence. When Djibouti became independent on June 27, 1977, it inherited divisions from the colonial period. The first task was to recreate the conditions of unity. Conflict was brewing between the two major ethnic communities, the Afars and Issas. In the early 1990s, there was a civil war between the Front pour la restauration de l’unité et la démocratie (Front for the Restoration of Unity and Democracy, Frud) and President Hassan Gouled Aptidon’s regime.
The signing of the peace agreement between the government and Frud in December 1994 was an important first step. However, the process of reconciliation only started when Ismaïl Omar Guelleh (IOG) became president in 1999. Talks led to the signing of the peace accords on May 12, 2001. Alongside the concept of “peace first”, the implementation of a sustainable government agreement and a policy of participatory governance cleared the way for Djibouti to work on national socioeconomic development issues, to launch Vision 2035, and to implement the trade hub strategy that would carry the country forward. Successive reforms have helped structure political life.
The introduction of a full multiparty system in 2002 and the reform of the legislative and local elections voting system to include a share of proportional representation in 2011 are steps going in the right direction. Reelected on April 9, 2021, IOG will pursue the development program underway for the past two decades.
National cohesion and the shared sense of belonging to the nation are all the more precious in that the challenges of the future are especially difficult: regional security and stability, economic modernization, the promotion of private initiatives, jobs, social inclusiveness, youth, sustainable government, participatory governance and the consolidation of the rule of law and justice.
2. An anchor of stability and security
Located on the Horn of Africa, a strategic and tormented region, Djibouti is an anchor of stability and security. Conflicts have historically riven this part of East Africa. The tensions in Djibouti’s two largest neighbors, Ethiopia and Somalia, attests to this continuous framework. Djibouti must remain unfailingly stable, maintain the balance between the regional powers and fulfill its collective security obligations, especially since it is the guardian of the Bab el-Mandeb Strait, a strategic link between the Indian Ocean and the Mediterranean Sea via the Red Sea and the Suez Canal. This stretch of water is the world’s fourth-busiest point of passage for oil tankers and essential for ships traveling to other continents.
Djibouti has stepped surveillance up to boost the trust of foreign powers with a presence on its soil. In 2017, China opened its first and only permanent overseas military base there. A stone’s throw from the US base, France has over 1,450 soldiers stationed in its largest military facility abroad. The presence of Japanese and Italian bases and foreign contingents underscore Djibouti’s geopolitical importance. Foreign bases also ensure military, political and economic support of the major powers in the region. In 2008, France initiated and the European Union (EU) implemented Operation Atalanta, a military mission that was extended last December until the end of 2022 and which fights piracy in the Gulf of Aden and the Indian Ocean. Djibouti takes part and serves as a logistical support point. Over 30 countries are contributing through the deployment of personnel or equipment.
Djibouti is also indispensable for humanitarian missions.In December 2020, the World Bank signed off on $30 million in additional funding to help refugees and asylum-seekers on its soil. The country has taken in over 30,000 displaced persons, most of whom fled the war in Yemen: nearly 20,000 Yemenis arrived in Djibouti between 2015 and 2017, according to the United Nations High Commissioner for Refugees. Others have fled the conflicts in Somalia, Eritrea and, increasingly, Ethiopia. Moreover, the commitment made by IOG before becoming president (“feed, care for and educate”) is not only aimed at his compatriots: refugees and migrants account for 20% of the medical visits in Djibouti City. Minors are looked after by schools and receive supplies and daily meals, getting the same treatment as the country’s children. It is therefore not surprising that the UN’s World Food Program (WFP) trusted Djibouti to set up its logistics base for the continent there.
3. A port and trade hub open to the world
One of Djibouti's major assets is its geostrategic position at the crossroads of three continents. The maritime route linking the Bab el-Mandeb Strait to the Suez Canal is one of the world’s busiest sea lanes, with nearly 30,000 ships passing through it every year. The country has naturally become an essential port, trade and logistics hub. In the late 19th century, France, wanting to catch up with the other colonial powers in the region, built a deep-water port there. In the mid-1960s, it became “France’s third largest port” after Le Havre et Marseille. Independent Djibouti's geostrategic position was bolstered when it became the only maritime outlet for its neighbor and ally Ethiopia. Following a long conflict that ended in 1991, Eritrea became independent, thereby depriving Ethiopia of its access to the sea. President IOG measured the consequences of these strategic changes and the development opportunities they offered.
By the 21st century, the port's facilities, dating from the colonial era, were antiquated. Djibouti lagged behind the competing ports of Salalah (Oman), Aden (Yemen), Jeddah (Saudi Arabia) and Jebel Ali (United Arab Emirates). IOG launched a development project to boost the port’s capacity by building a complex of several terminals. The Horizon oil terminal was built between 2004 and 2006. Two years later, the 1.2 million-TEU (Twenty-foot Equivalent Unit) capacity Doraleh Container Terminal (DCT) became operational. This infrastructure has proven to be very profitable: the $397 million construction cost was earned back in eight years. IOG inaugurated three new terminals in 2017. The first was the Doraleh Multipurpose Port (DMP), which boasts state-of-the-art facilities and high storage capacity. The other two are mineral terminals: the Autonomous Port of Ghoubet, which exports salt (an almost endless supply from Lake Assal), and the Port of Tadjourah, a shipping link to Ethiopia. In 2017, a railway was built connecting Djibouti City’s port facilities to Addis Ababa.
In two decades, investments have allowed the Port of Djibouti not only to catch up with but achieve a substantial lead over its competitors in the sub-region. In 2020, it was ranked as Africa’s leading container port by the World Bank. Djibouti is intent on widening its offer. In 2015, the country decided to invest in refueling facilities by creating Red Sea Bunkering. In addition, the first stage (2020-2023) of the original port’s redevelopment program is underway with the construction of a $200-million shipyard boasting the region’s only drydock able to lift and hold large vessels out of the water. This diversification should confirm Djibouti's status as a port, logistics and service hub open to Asia, Europe and Africa.
4. An industrial drive
In the framework of Vision 2035, IOG sees building ambitious infrastructures and boosting productivity as priorities. He refuses to limit Djibouti to the role of a transit hub for goods and wants to develop a strong national industrial base. The goal is to make Djibouti the Singapore of Africa: a small country with limited natural resources, but which is emerging because of its stability, economic performance and importance in global maritime trade. To achieve that, IOG is relying on two major projects: the Djibouti Damerjog Industrial Development (DDID) and the redevelopment of the original port.
Stage one in the development of the $3.8-billion Damerjog industrial park got underway on September 3, 2020. Built in three five-year stages over a 15-year period (2020-2035), the complex will stretch out over 30 square kilometers, two-thirds of which are being claimed rom the sea. The Moroccan group Somagec is building the first refinery and the oil terminal pier, which will be followed by a second refinery that will boost production capacity from 2.6 million to 13 million tons, or 8,000 to 40,000 barrels a day. Lacking hydrocarbon resources, Djibouti wants to join the small circle of African nations with a petrochemical industry. Stage three will focus on heavy industry, including steelworks, a cement factory, a shipyard, and a seawater desalination plant. While the Damerjog Industrial Park has a local dimension, the transformation of the historic port into a business district attests to an international ambition. In addition to the ship repair yard scheduled for completion in 2023, the $3-billion project includes offices, a high-end hotel, a marina, and a convention center. It is designed to international standards and focuses on innovation and fintech. The objective is to attract regional offices of prestigious consulting firms (KPMG, Deloitte, EY), major corporations (DHL, Cosco) and e-commerce leaders (Alibaba, Amazon or JD.com). The underlying goal is to create over 200,000 jobs to bring the unemployment rate down from 45% in 2019 to 10%.
Lastly, to further attract investors, in March 2016, Djibouti launched what will become Africa’s largest free zone: the Djibouti International Free Trade Zone (DIFTZ). It is expected to draw $3.5 billion in investment. The already-operational pilot phase consists of four industrial clusters focusing on trade, logistics, industry, and business services. The complex is expected to generate $7 billion in trade by next year. The DIFTZ is a symbol of Djibouti’s industrial and trade ambitions, and is considered as the AfCFTA’s first milestone.
5. Sustainable energy potential
Between 1999 and 2019, electricity output more than tripled, from 192 to 605 megawatts (MW). The rising number of Électricité de Djibouti customers shows that the program to provide as many people as possible with access to power is a success. Today, 60% of households have electricity, and the country aims for 90% by 2024. Similarly, and at the same time, access to water has improved considerably due to an increase in output from 15.4 m3 to 21.1 m3 and a significant decrease in network losses (from 42.3% to 26%). Cities in the hinterland now have their own water supply systems, and villages are better served by cisterns and public fountains. Furthermore, much of the infrastructure providing access to water have been put into service or rehabilitated. This includes 80 boreholes, the Douda water treatment plant, and 600 kilometers of pipes.
Djibouti’s swift development is necessarily generating more demand for energy. The DDID will let the country meet its own fuel needs and become a key player in the gas industry. Nevertheless, over 1,000 MW will be needed to launch major national infrastructure projects: the Damerjog Industrial Park, the free zone, and the business district. There is currently not enough electricity to cover the needs of a country that has become a large consumer. Consequently, the president has decided to boost Djibouti’s energy independence while increasing the share of green power. IOG is aiming for renewable energy to cover 85% of the nation’s needs.
Djibouti can rely on three major assets to help it achieve that target. First, the country can tap immense geothermal resources: studies estimate that production will exceed 1,000 MW by 2024. The first drillings, funded by $31 million from the World Bank, have confirmed that geothermal energy is an endless power source. Moreover, Djibouti receives 3,240 hours (135 full days) of sunlight a year, making it one of the world’s sunniest countries. Several solar power farms have been built in recent years. Based on a public-private partnership, the French group Engie has begun building the Grand Bara solar power plant after receiving the green light from the government a few months ago. Lastly, Djibouti is also using wind power. Construction of the Ghoubet wind farm has nearly been completed.
6. Green development
Djibouti offers an intense natural spectacle where our planet’s transformations are visible to the naked eye. Those lucky enough to visit say it is like traveling back in time to the world’s origins. Majestic natural sites, from Lake Assal’s salt flats to Lake Abbe’s limestone chimneys, the Day Plateau’s millennia-old forest, preserved marine wildlife and astonishing geological landscapes, are side-by-side with a rich cultural and archeological heritage. Paleolithic cave engravings attest to ancient human settlement and a rich history. The underwater depths off the coast of the îles des Sept Frères (Seven Brothers’ Islands) and in the Gulf of Tadjourah shine with coral reefs and the diversity of their protected wildlife.
The potential to draw visitors is undeniable. Tourism, a driver of socioeconomic development, is among the priorities in Ismaïl Omar Guelleh’s Vision 2035. A $880-million, five-year (2019-2023) plan aims to boost the number of tourists to 267,000 a year and create over 5,000 jobs. Covid-19 has had as much of an impact on the industry in Djibouti as everywhere else in the world, slowing its growth. Aware of the damage caused by mass tourism, the government aims to preserve the country’s environmental richness. The promotion of responsible tourism is a key component of its policy. National Tourism Agency director Osman Abdi Mohamed advocates for a development that preserves the sustainability of natural sites. Many development projects in Djibouti City focus on sustainable urban planning, such as Océanorium, a unique-looking scientific research center where about 50 aquariums will showcase Djibouti’s rich marine ecosystems. Scheduled for completion in 2023, it will be located in the business district. Rooftop solar panels will meet most of the building’s energy needs.
Climate change will not spare Djibouti. Droughts are occurring more frequently and unusually heavy rainfall is causing severe floods. To adjust to these conditions, Djibouti is taking innovative steps combining “grey” infrastructure, such as seawalls, and “green” infrastructure, which is based on natural or semi-natural systems with positive long-term environmental consequences. With funding from the United Nations Development Program (UNDP), the country has built a two-kilometer-long dike in Tadjourah to protect the city from flooding. The project will support government efforts to restore mangrove forests on the coast, which are very helpful in curbing rising sea levels. Djibouti's initiative sets an example in the global fight against climate change.
7. Digital ambitions
Although Djibouti Télécom has only 400,000 customers (out of a population of one million), it is the digital leader in the Horn of Africa. In information technology, the national company holds a decisive edge over the regional competition. Two decades of investment have allowed the country to develop a regional hub. Internationally, Djibouti Télécom’s customers include over 100 operators and providers, including Orange, Cogent, Vodafone and MTN Kenya. Djibouti also relies on the emergence of local businesses to create a digital ecosystem. The country is on an upward technological curve and has many assets to attract global corporations seeking to establish a presence in Africa.
The government’s proactive stance towards the industry and central position in global telecommunications systems fuel this momentum. Djibouti has already invested over $150 million in its landing stations, which serve six underwater cables linking Africa to Asia, the Middle East and Europe. These lines are indispensable for data transmission. The Eastern Africa Submarine System (EASSy) connects over 250 million East Africans. Djibouti has even launched a regional route that was completed in February 2020: the Djibouti Afrique Régional Express (DARE1), which connects the region’s two main telecom access points, Djibouti and Mombasa, Kenya. The operator accounts for $65 million of the $80 million invested in the 5,000-kilometer-long cable and owns 80% of the consortium that built it. CEO Mohamed Assoweh Bouh says the country is becoming a bridge between three continents.
To achieve its goals, Djibouti must offer transmission capacity, speed and content. The company now boasts the Horn of Africa’s most powerful data processing center, which has drawn interest from digital giants and CDN (Content Delivery Network) providers. They are planning to build a huge data center in the DIFTZ at Khor Ambado. The project, whose memorandum is being finalized, will become the cornerstone for the Smart Africa plan promoted by Rwandan president Paul Kagame. In July, the government announced the opening of Djibouti Télécom’s capital. The promise of a "minority but significant" stake, combined with the country’s bright economic outlook, offers attractive long-term prospects. But Djibouti intends to go further in developing its international growth strategy. In the meantime, the country is relying on a key asset to maintain its edge over the regional competition: the digital capacity of its facilities.
8. An appealing financial framework
Djibouti is four-dimension hub: logistical, commercial, digital and financial. Colossal investments in port, road and rail infrastructure have enhanced its geostrategic position. In addition, several reforms have improved the business climate and made the country more attractive to investors. President Guelleh has been liberalizing the economy since taking office. He strengthened the prerogatives and missions of the Banque centrale de Djibouti (BCD) and, in 2011, undertook reforms to adapt it to the needs of modern markets. Importantly, the convertibility of the Djibouti franc (DJF) into foreign currencies is unlimited, and the exchange rate with the dollar (USD) has remained unchanged for nearly 50 years (1 USD = 177.721 DJF). Two decades of growth have supported monetary stability and the legal framework has boosted the country’s credibility.
Furthermore, successive reforms have enabled the banking industry to branch out. Between 2000 and 2020, equity rose from 7.8 to 41.7 billion DJF. The sector posted over 1.55 billion in net income in 2020—despite Covid—compared to 803 million in 2000. The banking rate has followed the continental trend, tripling between 2010 and 2020. Today it stands at over 28% which is still relatively low. Djibouti’s financial appeal is not just local. Business prospects beyond its borders are also growing. The country has created a regional financial center that, for example, serves a significant share of capital from neighboring Somalia. BCD governor Ahmed Osman [see interview] stressed the strength of domestic financial institutions that have the opportunity to tap into the huge COMESA and AfCFTA markets. In Djibouti City, the presence of two of China’s largest financial institutions, Exim Bank of China and Silkroad International Bank, also attests to the appeal of Djibouti, which is seen as a safe and stable country.
With funding from the World Bank, Djibouti has launched a project to update the national financial infrastructure that should spur the automation and dematerialization of transactions with state-of-the-art technology. The initiative also aims to foster the emergence of new financial activities such as leasing and mobile banking. Developing fintech is another priority of the president’s Vision 2035. The business district rising on the site of the old port will become its main cluster, using its high digital capabilities to attract major international companies.
9. A strong investment in inclusiveness
Twenty years ago, Djibouti was a colonial-era port with uncertain development prospects. Today, it is a solid platform. In two decades, GDP has increased sixfold and per-capita income fivefold. In the social realm, the country promotes a truly inclusive economy to benefit as many people as possible. This is particularly visible in education. Djibouti earmarks 6.5% of its national wealth each year to this area, which is the government’s largest budget item. The figures speak for themselves: between 1999 and 2020, the number of middle and high schools respectively rose from four to 69 and two to 35. The primary school enrolment rate now stands at 92.2%. The number of girls enrolled in school has soared by 90% in 20 years.
In 1999, the country did not have a university. Today, over 10,000 students are earning degrees in 40 areas, including engineering, medicine, the sciences, literature, law, and economics. The University of Djibouti boasts an African logistics and shipping center of excellence as well as an East African global climate change observatory. This initiative is in step with the country’s socioeconomic reality and fits into a continental dimension. The institution trains 1,613 new managers every year. Under President IOG’s leadership, the education and professional training budget has risen at a steady pace to reach $115 million today and provides disadvantaged primary school pupils with supplies, textbooks, and daily meals. Investments in education and professional training have a key goal: inclusiveness.
In a complex global public health context, Djibouti has been successful thanks to the five-year Plan National de Développement Sanitaire (National Health Development Plan, PNDS) launched by IOG in 2001. The 2020-2024 plan’s $348 million budget gives healthcare workers the resources to practice in good conditions and offers Djiboutians a healthcare system that meets their needs. Since the medical school opened in 2007, the number of healthcare workers has risen at a steady pace from 1,664 in 2008 to almost 4,000 in 2019. Investment has been decisive in the fight against Covid-19: over 98% of the 13,501 declared cases were treated. The population of Djibouti City has risen from 20,000 in the late 1930s to nearly 600,000 today. The vibrancy of the past two decades has changed the face of the capital, especially when it comes to housing. Social housing programs and a growing number of real estate projects have fueled the growth of the construction industry, which has expanded by 900% in 20 years. The government takes an inclusive approach and is very active in building housing. For example, 2,500 of the 6,000 housing units built since 1999 were constructed by Fondation IOG, which the president set up in 2016. Thanks to the public-private partnership, the target of the current five-year plan is to build 10,000 units.
10. Active diplomacy
Because of its size, population and scarcity of natural resources, Djibouti is considered a small country. The president is aware of the implications: diplomacy must be active. As soon as he took office, IOG broke with his predecessor, Hassan Gouled Aptidon, who pursued a policy of passive neutrality, and worked to build Djibouti’s soft power. Active neutral diplomacy has become crucial to defending the country’s strategic interests. Its growing involvement in regional issues and active participation in mediating disputes between its neighbors have gradually made it a key power in the region.
This new paradigm was quickly illustrated in 1999, when IOG joined the committee steering the talks between Addis Ababa and Asmara. A few months later in Somalia, he led negotiations between the conflicting parties and worked to establish recognized institutions. In November 1999, he brought the Sudanese president and his opponent together at the Intergovernmental Authority on Development summit in Djibouti to facilitate the signing of a crisis resolution agreement. In January 2021, a Djiboutian mission managed to quell tensions between Somalia and Kenya, which were locked in a border conflict. In the two decades since IOG first took office, the country has become a key interlocutor on the international stage.
A major aspect of its diplomatic action is military partnerships. The successive installation of five foreign bases on its soil proved that the major international powers have faith in Djibouti’s stability and security. IOG has put the armed forces at the disposal of peace-keeping operations, making the country’s voice more audible. Several hundred Djiboutian troops are among the UN’s blue helmets and the African Union’s green helmets. Since 2011, Djibouti has actively participated in the African Union’s mission in Somalia, once again asserting its role as a stabilizing regional power.
In addition to the military aspect, there is an economic facet, which is backed up by the Vision 2035 plan. Djibouti is strengthening its ties with its main donors and partners while ensuring the accuracy of bilateral financial assistance monitoring. A case in point is its partnership with China. The scope of the agreement between the two countries is enormous. For example, the Exim Bank of China and China Merchants Group are financing the eight largest infrastructure projects begun by IOG. Moreover, Djibouti and Ethiopia share an economic complementarity that could serve as a model of regional integration. The port being the only point of passage for imports and exports from and to Ethiopia, which lost its access to the sea in 1993, Djibouti benefits from the total volume of its imports, which are expected to have tripled between 2015 and 2025. Considered as an honest broker on the international stage, Djibouti has doubled the number of its diplomatic representations since 2006 to almost 50. A country of its size usually has an average of only seven. It is now able to wield significant influence.